The announcement of permission to sell Iranian oil for dollars and a partial unfreezing of frozen assets, brokered by Pakistan and Qatar, sparked hopes among Iranians for an imminent economic improvement. However, in practice, the first tangible result for ordinary people was not a drop in prices but a sharp surge. Consumers were surprised to find that the cost of bread in a number of provinces had jumped, shattering the recent optimism.
A 40-year-old Bahram at one of the bakeries said the price of the popular lavash flatbread rose in a single day from 14,000 rials (about $0.01) to 27,000 rials (roughly $0.02). In his view, this “sudden increase” wiped out the better mood that had come with the news of the agreements. He admitted that he had hoped for a easing of everyday financial pressure, but found himself facing the opposite situation.
Another buyer, a woman about 50 years old, added that despite the price increase, local bread is still cheaper than in neighboring countries. Because of this difference, she explained, bread and flour are often smuggled abroad or even fed to livestock instead of expensive imported animal feed. As a result, prices rise not only due to internal decisions but also because of the specific dynamics of the regional market.
A bakery worker, Reza (28), said he believes the rise is not directly connected to the talks. According to him, the decision to raise prices was made earlier; it was just that its implementation at government bakeries coincided with the first round of dialogue in Switzerland. He noted that prices at private bakeries had gone up several months earlier, and that these businesses continue to face persistent increases in rent, energy, and spare parts, even though the government still subsidizes flour.
At a large store in west Tehran, 67-year-old Hadja Iftikhar drew an unhappy conclusion: most food products have become 20–100% more expensive since the beginning of the year. “Here prices only go in one direction — up,” she said. “I haven’t seen any real decrease, either for food or for basic necessities.” Her words are echoed by market monitoring data, which does not show any “returns” from diplomatic successes in the pockets of ordinary Iranians.
The currency market reacted to the news of a preliminary understanding with the dollar falling from nearly 1,800,000 rials to 1,540,000 rials, but then the exchange rate partially recovered and stabilized at around 1,610,000. Mehdi, a money changer from the financial district of Tehran, explained the instability by “contradictory statements by Americans” about exactly how the unfrozen Iranian funds will be used. In his view, the market is torn between hope for an inflow of foreign currency and fears stemming from the chronic budget deficit and the costs of rebuilding the economy.
In addition, seasonal factors came into play: as the days of Tasu‘a and Ashura (Shiite mourning dates) approach, demand for cash foreign currency traditionally falls, while at the same time the need for Iraqi dinars rises for pilgrims’ trips. All of this adds uncertainty and prevents the market from settling at lower levels.
By contrast, the stock market reacted to the outcome of the Geneva talks in the most optimistic way. The Tehran Stock Exchange index on Wednesday rose by 1.91% and reached 5,160,000 points, recouping a two-day decline. Experienced trader Masud called the session “a turning point”: net capital inflows returned after three days of outflows, and the number of advancing stocks clearly outnumbered declining ones.
Investors actively bought shares in oil and petrochemical companies, banks, shipping and processing firms that benefit directly from sanctions relief. Demand also increased for auto manufacturers and heavy industry stocks in anticipation of renewed international cooperation. However, Masud emphasized that preserving these gains depends entirely on the further course of the talks and concrete economic steps—not just on political statements.
Comments on the news
Why did Pakistan and Qatar act as intermediaries between Iran and the United States, and what interests do they have in this region? – Pakistan, as Iran’s neighbor, is seeking stability along its borders and is interested in developing economic ties (including energy and trade), as well as reducing tensions that could threaten its internal security (for example, in Balochistan). Qatar, by contrast, uses its traditional regional role as a mediator: it wants to strengthen its own influence, ensure the security of liquefied natural gas (LNG) exports through the Persian Gulf, and diversify its foreign policy links by serving as a bridge between the West and Iran. Both countries benefit from de-escalation, as it reduces risks for regional trade and investment.
How does Iran’s flour subsidy system work, and why does it lead to bread smuggling to neighboring countries—and to bread being used as animal feed? – The Iranian government provides large subsidies on flour (about 80% of the market price) to make bread affordable for the population. However, due to corruption and a weak system of oversight, some of the subsidized flour leaks to the black market. Smugglers take it to neighboring countries (Afghanistan, Pakistan, and Iraq), where prices are higher, allowing them to reap extra profits. In addition, cheap flour (and bread) becomes economically attractive feed for livestock: the cost of feed made from bread turns out to be lower than grain feed, especially when prices for compound feed rise. This creates a vicious cycle—subsidies meant to help the poor end up fueling smuggling and livestock production.
What are Tasu‘a and Ashura in Shiite Islam, and how do these days of mourning affect demand for cash and Iraqi dinars in Iran? – Tasu‘a (the ninth day of the month of Muharram) and Ashura (the tenth day) are the culmination of Shiite mourning ceremonies in memory of the martyrdom of Imam Husayn and his companions in the Battle of Karbala (680 CE). On these days, millions of Iranians make pilgrimages to Iraq (especially Karbala and Najaf), give alms, and make donations. This sharply increases demand for cash (for travel expenses, purchases, and charity) and for Iraqi dinars, since Iranians need the local currency to pay for things in Iraq. As a result, exchange rates rise, and the Central Bank of Iran is forced to put additional cash supplies into the market, which can intensify inflationary pressure.
Which sectors of Iran’s economy are most dependent on exports and external markets, and why do petrochemicals, shipping, and heavy industry especially benefit from sanctions relief? – The most export-dependent sectors include petrochemicals (the export of polymers, fertilizers, and methanol—around 20% of non-oil exports), shipping (sea transport is the main channel of foreign trade), and heavy industry (metallurgy, automobile manufacturing, and steel). Sanctions relief benefits these sectors because: (1) petrochemicals gain access to global consumers and modern technologies, increasing capacity utilization and profits; (2) shipping is freed from restrictions on insurance and port services, which reduces costs and allows Iranian vessels to trade more actively (including via alternative routes); (3) heavy industry can import components and equipment without intermediaries, and restart steel and sheet exports, which fell sharply under sanctions. All three industries are capital-intensive and require a continuous inflow of foreign currency, so easing sanctions provides a strong boost.
Full version: كيف تفاعلت أسواق وبورصة طهران مع السماح ببيع النفط بالدولار؟